DRAM, MAGS ETF Issuer Eyes AI Photonics Opportunity With New Optical Stocks Fund

• Roundhill’s dedicated memory ETF, DRAM, has been hugely successful with investors.
• Its new photonics ETF will invest and trade securities of photonic and optical companies, with a preference for those with major research and development spending.
• Investors are betting that capital will flow into companies that make the components powering them, particularly in emerging technologies such as photonics, which promise faster, more efficient data transfer.

Roundhill ETF Trust on Wednesday announced plans to launch a new exchange-traded fund focused on companies developing photonics, optical components and related technologies – a fast-emerging space amid the rapid buildout of AI data centers.

The investment firm filed a prospectus for the Roundhill Photonics & Optics ETF (LYTE) with the securities regulator, pending approval. The fund will invest and trade securities of companies “whose core technology involves generating, manipulating, detecting, or transmitting light for various technologies, such as AI data centers, defense, medical imaging, industrial manufacturing, and quantum computing” and will maintain 80% of its holdings in such companies, according to the filing.

LYTE would seek to acquire stakes in companies working on optical transceivers and modules, laser sources and photonic components, silicon photonics (“SiPh”) integrated circuits, optical interconnect systems, photonic substrates and wafer materials, photonic foundry and contract manufacturing services, and industrial and defense lasers, among other devices and technologies.

Photonics Tech In Focus

Roundhill did not disclose the companies it plans to invest in. Major companies in its focus area include POET Technologies (POET), Lumentum Holdings (LITE), Coherent Corp. (COHR), Applied Optoelectronics (AAOI),  IPG Photonics (IPGP), Corning (GLW) and Ciena (CIEN) – and several of them have seen their stocks rise sharply in the recent months.

With gains of 134% so far this year, POET is among the most closely watched stocks in the space. Amid the rapid expansion of data centers, investors are betting that capital will flow into companies that make the components powering them, particularly in emerging technologies such as photonics, which promise faster, more efficient data transfer.

Roundhill’s DRAM Success

The development comes after the success of Roundhill’s ETF tracking memory chip stocks, which have surged multifold over the past year due to high demand, shortage and higher pricing. The DRAM ETF has achieved $1 billion in assets under management in 10 days since its April launch. Overall, the value of the fund’s units has surged 77% since the launch.

Roundhill also operates another ETF that tracks the “Magnificent Seven” stocks and has been popular with investors due to sustained high interest in tech and AI companies. Roundhill Magnificent Seven ETF (MAGS) has gained 5.4% year to date and has more than doubled since its launch in November 2023.
 

In overnight trading ahead of Thursday, DRAM was up nearly 4%, tracking gains in Korean shares of Samsung and SK Hynix, two of its biggest components. MAGS was up 0.2%. On Stocktwits, the retail sentiment is ‘bearish’ for DRAM and ‘extremely bearish’ for MAGS as of early Thursday.

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